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Incomes, Exchange Rates and the U.S. Trade Deficit, Once Again

  • Chinn, Menzie

This paper discusses recent developments in the empirical modeling of U.S. import and export flows, and the implications for adjustment of the trade balance in response to changes in the value of the dollar and relative incomes. The results of examining the behavior of trade flows in the period spanning the late 1990’s boom and dollar appreciation are also reported. The estimates for the updated data do not exhibit the income asymmetry typically found in other studies, although a reduction in the current account would require a substantial real depreciation, holding all else constant.

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Paper provided by Center for Global, International and Regional Studies, UC Santa Cruz in its series Center for Global, International and Regional Studies, Working Paper Series with number qt0tc442fc.

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Date of creation: 22 Dec 2002
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Handle: RePEc:cdl:glinre:qt0tc442fc
Contact details of provider: Web page: http://www.escholarship.org/repec/cgirs/

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  1. Ellen E. Meade, 1991. "Computers and the Trade Deficit: The Case of the Falling Prices," NBER Chapters, in: International Economic Transactions: Issues in Measurement and Empirical Research, pages 61-88 National Bureau of Economic Research, Inc.
  2. Michael P. Leahy, 1998. "New summary measures of the foreign exchange value of the dollar," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Oct, pages 811-818.
  3. Catherine L. Mann, 1999. "Is the U.S. Trade Deficit Sustainable?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 47, December.
  4. Maurice Obstfeld and Kenneth Rogoff., 2000. "Perspectives on OECD Economic Integration: Implications for US Current Account Adjustment," Center for International and Development Economics Research (CIDER) Working Papers C00-116, University of California at Berkeley.
  5. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  6. Houthakker, Hendrik S & Magee, Stephen P, 1969. "Income and Price Elasticities in World Trade," The Review of Economics and Statistics, MIT Press, vol. 51(2), pages 111-25, May.
  7. repec:ucn:oapubs:10197/253 is not listed on IDEAS
  8. Karl Whelan, 2000. "A guide to the use of chain aggregated NIPA data," Finance and Economics Discussion Series 2000-35, Board of Governors of the Federal Reserve System (U.S.).
  9. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  10. Robert Z. Lawrence, 1990. "U.S. Current Account Adjustment: An Appraisal," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(2), pages 343-392.
  11. Goldstein, Morris & Khan, Mohsin S., 1985. "Income and price effects in foreign trade," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 20, pages 1041-1105 Elsevier.
  12. Krugman, Paul, 1989. "Differences in income elasticities and trends in real exchange rates," European Economic Review, Elsevier, vol. 33(5), pages 1031-1046, May.
  13. Menzie David Chinn, 1991. "Beware of econometricians bearing estimates: Policy analysis in a “unit root” world," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 10(4), pages 546-567.
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